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06 September 2012, 17:09

Study for US Congress outlines options against patent trolls

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Congressional Research Service logo The US Congressional Research Service has made a range of suggestions that aim to clarify the "fuzzy boundaries" of software patents and make it more difficult to abuse the patent system. The "notice function" of patents that usually demarcates a clearly defined field of intellectual property rights and provides clear information on these rights to competitors "has broken down in the IT sector", the service said in a recently published 23-page overview of the current "patent trolls" debatePDF. It is "economically infeasible or irrational" for defendants to search the entire field of existing patents to avoid infringement, explained the authors, adding that this puts trolls in a highly advantageous bargaining position when negotiating royalties.

The authors of the report base their conclusions on commentators who say that the hardware and software sectors are mired in what they call a "patent thicket", noting that a company wanting to market a new technology must first attempt to penetrate this tight mesh of overlapping patent claims. However, the researchers added that even the most thorough patent search can't provide full clarity because patents that are pending at the USPTO can't be taken into consideration. They say that, as an added difficulty, patent applicants deliberately keep patents pending so that they can keep their claims secret for as long as possible, setting traps for other developers.

Their analysis concludes that attempting to clear the patent thicket is not much use because specialised licensing firms often risk engaging in lawsuits that are weak or entirely unfounded. Apparently, 92% of all judgements in court cases that were initiated by patent trolls turn out to their disadvantage because there is not enough evidence of an infringement. According to the report, "the vast majority" of defendants don't even allow things to go that far. To save court costs, they tend to settle beforehand and pay royalty demands that are set "strategically well below litigation costs". The researchers said that the trolls have very little to lose and that their risks are always manageable.

With reference to another study, they added that licensing experts who don't turn inventions into products themselves generated $29 billion in revenues from defendants and licensees in 2011. Apparently, this represented an increase of 400% over the 2005 figures, with only 25% of revenues flowing back to support innovation.

According to the Congressional Research Service, critics assert that the trolls undermine the actual purpose of patent law – which is to promote innovation by providing incentives to invest in the development and commercialisation of inventions. The researchers noted that others argue that such litigation generates economic liquidity and that small inventors are among those who gain the most. However, the US Federal Trade Commission (FTC) and "several leading scholars" suggest that these benefits do exist, but are significantly less than the costs they impose on the economy.

As an antidote, the paper puts forward various more or less radical initiatives. For example, it states that there are demands to completely exclude software and other computer-based inventions from the range of patentable inventions; however, the researchers said that before amending patent law, US Congress must investigate carefully whether the amendments conform with international obligations such as the TRIPS agreement. To limit high-tech patent claims, they explained, Congress could consider amendments that oblige the courts to perform a test. Judges would then need to check whether a claim is "susceptible to multiple interpretations".

The report also mentions proposals to cut back on the options to file continuations for pending patent claims or to increase the fees for maintaining patents over time. According to the researchers, it is worth considering whether to generally shorten the periods of protection for software patents because the trolls file most of their litigation claims in the last three years of the 20-year term. A patent could also be invalidated if it hasn't been practised for a number of years, they added. The report said that others consider it sufficient for patent owners to publish their licensing terms from the beginning.

The researchers also rekindled the suggestion to reduce the scope for damages and royalty claims in patent disputes – this suggestion failed to secure a majority during the debates around the US patent reform that was approved as part of the "America Invents Act" in 2011. Their report welcomed the fact that the remaining limitations restrict the ability to sue multiple unrelated defendants for infringement in the same case or trial. Additionally, the researchers mentioned recent discussions in US Congress around the introduction of the "SHIELD Act" which proposes that, in a court case concerning IT patents, an unsuccessful complainant must bear all legal costs.

(Stefan Krempl / crve)

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